Kelsey would like to take the maximum deduction available for the depreciable assets placed in service...

Kelsey would like to take the maximum deduction available for the depreciable assets placed in service this year. Which option is NOT available to her?

Claim 100% bonus depreciation for all property.

Deduct the cost as part of COGS.

Use the de minimis safe harbor election under the tangible property regulations (TPRs).

Use the Section 179 deduction for all 5-year property.

Solutions

Expert Solution

Based on the information available in the question, we can answer as follows:-

The correct answer for the question is Option B - Deduct the cost as part of COGS. Depreciable assets are assets that are used by the business on a day to day basis to carry out its operations. The depreciable assets are supposed to be a charged a depreciation expense every year that the asset is in service and should be recorded appropriately on the Income statement. As such, depreciable assets cannot be recorded as a cost of goods sold. These are assets used to further produce the goods of the company.

Option A is incorrect as Bonus Depreciation of 100% is allowed per IRS.

Option C is incorrect as de minimis safe harbor election under the tangible property regulations is a valid option that is available for Kelsey.

Option D is incorrect as using Section 179 deduction for 5 year property is a valid method of charging the Depreciation expense.

Please let me know if you have any questions via comments and all the best :) !

ekkarill92 answered 2 years ago

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